European industrial response to peak-load pricing of electricity, with implications for U.S. energy policy

by Jan Paul Acton, Bridger M. Mitchell, Willard G. Manning

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Industrial customers in several Western European countries have faced time-of-day and other peak-load electricity rates for several decades. Examining adjustments in electricity use on an industry-by-industry basis gives some insight to response that might be observed in the United States under similar price incentives. Evidence is found that several manufacturing industries can, in the aggregate, make significant shifts from peak to off-peak hours. Such shifts would permit U.S. electrical utilities to generate electricity more efficiently and, in the long run, construct a mix of generating facilities that offers a lower combined operating and capital cost. Estimates suggest that if U.S. manufacturing customers show the same degree of response to peak-load pricing as their European counterparts, between $0.4 and $1.8 billion in utility operating costs will be saved per year; and in the long run between $1.3 and $2.6 billion in combined capital and operating costs.

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